alright guys im still trying to figure out what direction i want to go in... i really want to be a landlord and own multiple properties for cash flow but to be honest i dont have that much money for down payments and as far as credit i'm just starting to build it up... so i am contemplating wholesaling.
My question to you is if i find a seller that is motivated everything is a go and i have the property for lets say 14- 30 days or however long the contract is for and i drop the ball and cant find another buyer... am i obligated to buy the house or does the contract become null and void?....
Work on both at the same time. Its not as if a seller is going to fall into your lap immediately. Its a lot like sending out resumes for a job. If you send one, and wait for a response before sending a second, you'll be a long time looking for a job.
The point about knowing what your buyers want is a good one, though. If you don't have specific criteria from buyers, be very conservative in what you agree to purchase from a seller.
Wholesaling is a VERY viable strategy to master before moving on to other Investment strategies that may involve more funding, etc.
To keep this simple, if you negotiate a deal with a seller...write the contract up...agree to pay an earnest deposit...open escrow to begin due dili...and you get to the COE (close of escrow) date WITHOUT being able to close it out either by you or your buyer.....the ONLY 3 things at stake will be - 1. Your Earnest Money Deposit amount 2. Your Wasted time on the deal AND last but not least 3. Your Investor/Buyer performance reputation.
My advice would be to find out QUICKLY whether or not you think you can sell the deal EARLY in the game.(especially within the due dili period)
The best thing is to be upfront with everyone involved in the transaction if you think you are going to have a problem.
thanks man...i'm just trying to start somewhere ..i'm getting all geared up to market myself the right way for buyers and seller. just scared if i find someone that has a great deal and i cant provide a seller that i ..a: wont find a buyer or b: loose a lot of money
i will take the plunge soon i just dont know where i should start....marketing, finding a REA , or mortgage broker
Just keep EVERYTHING simple in the beginning. Narrow down your REI focus to ONE strategy(wholesaling)...ONE market niche(REOs/Shortsales/Homeowner seller, etc)...ONE set marketing strategy to market your Wholesaling services/deals.
Begin with the END in mind to start Mapping/Planning out your plan of attack.
What is your MAIN goal for your new Wholesaling business? IE To secure & wholesale 1 house a month? 5 houses a month? Or, is your main goal to make $10k a month?
Then, break it down from there.
Goal - 1 house a month
Strategy - Wholesaling
Target Niche - REOs
Create a Marketing plan (EVERY possible step/task)
Create an Acquisition Plan (EVERY possible step/task)
Create a Disposition Plan (EVERY possible step/task)
This may be a lot to take in right now, but I would HIGHLY suggest you start with a simple Wholesaling plan outline like this one. Take th etime to sit down UN-interrupted and start PLANNNG out how your business will run.
It took me a couple years to really figure out that this part of your business is KEY!!!
I'm sure you will be way ahead of most other wanna be wholesalers out there if you start planning out your business this way.
Oh ya...if you are most fearful about not having your exit strategy in place, then focus more attention to your Disposition plan. Make sure you have a strategy to build your buyer's list RIGHT AWAY. Screen your buyers and make sure you focus on the cash buyers that are willing to tie a deal up with earnest money FAST once you bring the new deal their way.
wow thank you for putting all that info right there for me.... that made it look alot easier then sifting through many different posts to see what to do next....... so do you suggest that I build up my buyer list first before even looking for my sellers?.... and also you said concentrate on one niche...for example---- foreclosures or pre-foreclosures ?
To ensure you don't get locked in the contract make sure you have an out clause of some kind. It could be an inspection period clause, partner approval clause, finance clause, etc.
Also, make sure you state that all earnest money is refundable if you choose not to close on the property.
how would i go about presenting this out clause to the seller?.
.isn't it a selling point for him to let you try and get rid of his property in the alotted time and if i dont come through he keeps the earnest money?
Charles,
You should educate yourself with purchase and slaes agreements in your state, learn the contingency clauses, how to write them, and where they are inside your PSA.
You also need a large buyers list of "real buyers" BEFORE you consider putting anything under contract. Know what your buyers are looking for and what numbers they need to buy. This will help you in your price points and search criteria.
You are not necessarily telling the seller you will only buy if you can wholesale it. Just make sure the PSA stipulates the contract is assignable. Also make sure your earnest money depoist is fully refundable upon cancellation of the PSA within the inspection period.
Thanks to Will and many other knowledgable individuals on this site I've come to learn that before you do anything else you should build your buyer's list. Keep building it and never stop.
Once your list is big enough and you understand your buyers wants and needs, then you can go put properties under contract.
Work on both at the same time. Its not as if a seller is going to fall into your lap immediately. Its a lot like sending out resumes for a job. If you send one, and wait for a response before sending a second, you'll be a long time looking for a job.
The point about knowing what your buyers want is a good one, though. If you don't have specific criteria from buyers, be very conservative in what you agree to purchase from a seller.
thank you for verifying that for me and ut is what i will do.....
i dont mean to hijack my own thread but i just want to throw something out there......
my passion in real estate is to own and rent out properties however i do not have money to use for a down payment and i just started building my credit around one year ago. I doubt i will qualify for a loan so i decided that wholesaling is the way to go (even tho i know i wont enjoy it as much) ... would you recommend i still go ahead and try to wholesale or find a way to start buying rentals??
"would you recommend i still go ahead and try to wholesale or find a way to start buying rentals??"
I would say stick with Wholesaling for now. Rentals are not as easy as they seem and without a lot of cash you'll be in trouble if you get a tenant that trashes the place. Buying and Holding property takes a great deal to insure that you have cashflow but also takes a lot of capital to maintain the place.
i see....do you have any experience with wholesaling in new york???...it just seems in this down market no one is buying but rather renting......this leads me to believe when i am building my buyer list i should focus more on cash buyers (investors) rather then first time home buyers
I've done business in NY but not Real Estate related. Ironically, I have friends that buy and hold in NYC but they all have the capital needed to do it.
Your definitely going to want to work with Investors rather then First time home buyers. First time home buyers for one will most likely have FHA financing which won't allow you to assign your contract, also I believe there is "title seasoning" needed for those.
A great way to build your buyers list is to either drive around or walk (i prefer to walk as I tend to be able to focus on the homes and not the road or cars around me) and look for people doing Rehabs. When you see them just walk up and talk with them, see if they are looking for more deals. I've found buyers like this and so can you.
I forgot to mention that you may want to look into Lease Options later down the line. Lease Op's are great for this market and can be a win-win-win for everyone. It does take more money then Wholesaling and you'll need to have any contracts you use looked at by a Real Estate attorney. I would Wholesale and learn other strategies while you use your Wholesale business to fund your next step into Investing.
For buy and hold without credit or cash, you can also look into purchasing via sub2 (subject to).
This requires marketing to motivated sellers consistantly and utilizing other resources, but can get you into properties without credit.
Wholesaling is certainly a place to start, but it is not as easy as some make it sound. Finding the right deals that are good enough for an investor to buy and still have room for your profits is no easy task, but once the process is learned, you should be able to succeed.
Whichever route you choose, pick one and focus on it, stay determined and do not give up. RE investing is an emotional rollercoaster and requires serious determination and drive to succeed.
i see....do you have any experience with wholesaling in new york???...it just seems in this down market no one is buying but rather renting......this leads me to believe when i am building my buyer list i should focus more on cash buyers (investors) rather then first time home buyers
This will depend upon your strategy. If you buy correctly then you can offer for sale to anyone at a price that will make them buy rather then rent because it is cheaper for them to do so.
In order to buy cheaply enough to do this you may have to have financing, or cash, already ready to purchase it outright, instead of being able to assign a contract. Then you can sell to those who would rent by utilizing owner financing.
In other words you must develop your game plan.
How are you going to enter?
Where and or how do you "advertise" your property for sale?
Or do you take advantage of the market as you described it and rent for a while before the next step?
How are you going to exit?
.i actually have some credit and financing in the snese that my father owns the house we are living in now...he recently refinanced the house to do god knows what....probably pay bills.... but he said as long as i have all my ducks in order and a deal sound right he will be my financial backing (by taking out a loan)...
please keep in mind that he is 50 ....lost all his retirement from his company going under and has been behind the 8ball forever providing for his family... needless to say he would pour the last dollars he had into me investing it......i have to succeed for me...for my family and for everyone thats says it cant be done......i curently have a decent amount of money saved....around 10k or so but that buys me nothing here!!!!..i guess wholesaling here i come
.i actually have some credit and financing in the snese that my father owns the house we are living in now...he recently refinanced the house to do god knows what....probably pay bills.... but he said as long as i have all my ducks in order and a deal sound right he will be my financial backing (by taking out a loan)...
please keep in mind that he is 50 ....lost all his retirement from his company going under and has been behind the 8ball forever providing for his family... needless to say he would pour the last dollars he had into me investing it......i have to succeed for me...for my family and for everyone thats says it cant be done......i curently have a decent amount of money saved....around 10k or so but that buys me nothing here!!!!..i guess wholesaling here i come
thank you sabrina...i've been stressing myself out...its so hard to fit real estate into my work schedual as i am working 2 jobs to build capital....im just trying to find time to get it all in and start the right way.... god knows in this market there is room to make good money but in new york it doesnt seem that easy..... i have a passion for real estate but i dont know if i should quit one of my jobs to start this and risk having less income to invest....
Rental Properties are a suck fest. The tenants waste your time, money, energy, and have NO prode of homeownership. If you don't believe me, just talk to a few "landlords" in your area. They'll totally agree.
Instead, try the Lease Option or Owner Financing Exit Strategy. Same passive income theory, without all of the BS and headaches. Positive cash flow is KING - and so are glorified tenants who pay you $5000 to live in your house.
I say keep plugging away for info on this site and put together a step by step strategy. I understand what you mean trying to get in real estate without money or proper knowledge. I am there now. What I think you should do to make this applicable is write down your path to a property step by step, then try to tackle each objective. I would even say put your plan on this site to see if you are heading in the right direction.
Sometimes I am afraid I would get taken advantage of by more savvy investors but you have to make a first step and apply the knowledge.